Rupiah Gains to 19-Week High as Jokowi Candidacy Lures Inflows

March 17 (Bloomberg) -- Indonesia’s rupiah rose to a 19-week high after foreign funds pumped money into local stocks as
Jakarta Governor Joko Widodo announced he would run in July’s
presidential election.

Overseas investors added $656 million to holdings of
Indonesian equities, the most since May, on March 14 as the
Indonesian Democratic Party of Struggle (PDI-P) said Widodo,
known locally as Jokowi, would be its candidate. That helped
push the Jakarta Composite index up 3.2 percent and into bull-market territory. A Jokowi administration would probably boost
spending on infrastructure and public welfare, according to a
report last month from CIMB Group Holdings Bhd.

The rupiah strengthened 0.6 percent to close at 11,293 per
dollar, prices from local banks show. It reached 11,254 earlier,
the highest level since Oct. 31. In the offshore market, one-month non-deliverable forwards advanced 0.1 percent to 11,329
per dollar, trading 0.3 percent weaker than the onshore rate,
data compiled by Bloomberg show.

“Foreign funds are rushing in after the Jokowi news,”
said Putra Perdana Akbar, a foreign-exchange dealer at PT Bank
Rakyat Indonesia in Jakarta. “The rupiah strengthening too fast
could weigh on exports, so that could become a concern, but
strong inflows may continue to support the gains.”

Jokowi led in a January opinion poll by the Indonesian
Survey Circle, attracting 35.6 percent of support, followed by
20.1 percent for Aburizal Bakrie of the Golkar party.

Bonds Rally

The JCI has risen more than 20 percent from an Aug. 27 low,
the percentage of increase commonly defined as a bull market. PT
CIMB Securities Indonesia, the nation’s second-largest
brokerage, sees the JCI gaining a further 7 percent this year on
the Jokowi nomination and possible presidency, analyst Erwan
Teguh in Jakarta said after the market closed on March 14.

A fixing used to settle the rupiah forwards was set at
11,239 per dollar today, from 11,423 on March 14, by the
Association of Banks in Singapore. Bank Indonesia’s onshore rate
was placed at 11,272 today, from 11,421 last week.

One-month implied volatility, a measure of expected moves
in the rupiah used to price options, dropped 24 basis points, or
0.24 percentage point, to 10.56 percent.

The yield on the government’s 8.375 percent bonds due March
2024 fell three basis points to 7.96 percent, according to the
Inter Dealer Market Association.